Competition Stirs Creativity to Woo Car Shoppers

Members flocked to an auto buying service at First Financial Credit Union last year, saving them more than $1 million in financing costs

With several back-to-back years of auto lending growth, credit unions have much more room to be creative in their efforts woo car shoppers away from their direct competitors, namely dealerships.

Even though the $420 million First Financial Credit Union in West Covina, Calif., launched its in-house Auto Buying program four years ago, the cooperative had record growth in 2013, said Torri Scott, vice president of marketing and core product manager.

With an average savings of $2,500 of each car sold, members saved more than $1 million through the service last year, Scott said. On average, 40% of First Financial's monthly production came from members using the auto buying service.

“We celebrating 80 years of service to the California educational community,” Scott noted. “We know members turn to us and trust us and we’re going to save them money.”

The way the auto buying program works is members will call into First Financial's call center or visit the branch where the frontline team will ask about their needs, said Vivian Vega, vice president and core product manager at the credit union. If a member is shopping for a vehicle, they are introduced to the auto buying service.

Here, they go through the pre-approval process to see how much they would qualify for. The numbers are forwarded to the auto buying unit and the member is contacted within 24 hours to get more details such as the type of car they’re looking for and what they want to pay. First Financial can even arrange to have the car delivered to the member's home or business. Vega said members are also armed with knowledge before they go to the dealer to ensure that they aren't being sold add-ons they don't want. There are also no broker-dealer fees to contend with, Scott said.

Prior to having the auto buying service, members would get pre-approved for an auto loan with the credit union. However, when they went to the dealer to test drive vehicles, First Financial recognized some members were accepting dealer financing not realizing the inflated vehicle sale prices or compromises taking place for what seemed to be a good deal, according to Carlton Musmann, First Financial president/CEO. The auto buying service has drastically decreased this trend, he added.

“The increased production has been done without reducing our auto loan rates or price matching. Members save thousands of dollars on the price of the vehicle,” Musmann said. “Additionally, our GAP and MBI production has increased (and) in some cases, we doubled production in 2013.”

As for the types of vehicles members are securing financing for, it's nearly a split between new and used, Vega said. In 2013, First Financial approved $52.3 million in used car loans and $18.4 million in new car loans for a total of nearly $71 million in its auto loan portfolio, according to data provided by Scott.

Much of the success of the credit union's auto buying service has come from word of mouth. In 2013, on average, 87% of the program's use came through referrals, Scott said.

Read more: Members Private Sale ...

Members of the $64 million Space City Credit Union in Houston recently witnessed another way to buy and sell their vehicles through the cooperative's Members Private Sale site. The free channel furnishes a guaranteed offer for sellers through a third-party partner that provides members with an option to sell their car quickly at a fair price, according to Space City.

Members now have access to a vehicle listing with a free Auto Check report, Kelly Bluebook data, showcase photos, condition report and social media integration for sales optimization.

The MPS is a software as a service product designed as a lead generation system to provide credit unions with increased direct auto loan volume, leases and ancillary products such as extended warranties, GAP insurance and credit life and disability insurance for credit unions, according to the company.

As an early adopter of MPS, Space City has been instrumental in providing feedback for product enhancements through the beta release to help make MPS 2.0 a valuable tool for both credit unions and their members, MPS said.

“We’ve been excited about the opportunities this tool offers for both the credit union and our members,” said Craig Rohden, president/CEO of Space City. “Ultimately, this is a terrific lead-gen tool for our loan officers, and provides us with an opportunity to engage our members directly.”

He added, “The social media integration provides us with a dialog and relevant content to drive member-to-member engagement that was missing before. We look forward to the launch and the positive response from both our members and our bottom line.”

Members Private Sale CEO Steven Keys said plans are in place to roll out MPS 2.0 to credit unions in the greater Texas region in 2014 and gradually expand nationally based on market response.

For Valentine's Day, the $136 million Halliburton Employees Federal Credit Union in Duncan, Okla., held its Sweetheart loan promotion that offered a .99% annual percentage rate to the first 500,000 in auto loans and then 1.49% to all other approved loans for the remainder of the day, according to Jackie Haines, marketing and business development associate.

“We had a very successful turnout completing $523,016 at the .99% rate and $1.3 million at (the) 1.49 rate for a total of 22 loans at .99% and 71 total loans, Haines said. “All members could come in and get preapproved beginning on February 7 to give them bargaining power for new purchases.”